International Political Economy International Economics

1. Production and trade structure

2. • Since 2009, the Obama administration has imposed high tariffs on
imports of Chinese tires and solar panels into the U.S
• Challenged China at the WTO over its unfair subsidies to domestic car
manufacturers and its tariffs on imported U.S steel and cars.
• In 2012, republican Mitt Romney attacked China for engaging in
unfair trade practices such as currency manipulation and theft of U.S
patents and technology.

3. • “trade is always political” Robert Kuttner
• Many IPE theorists believe that no topic is more quintessentially IPE
than trade.

4. • Not only does trade continue to be very important for national
officials,
• Also, the number of political actors and institutions outside the
nation-state that shape and manage trade has increased significantly
since the end of Cold War.

5. • The International production and trade structure is composed of the
set of rules and relationships between states, IOs, businesses and
NGO
• that influence what is produced and sold, where, by whom, and at what
price.
• Links national states and other actors, furthering their independence
and mutual benefits but also generate tensions between them

6. Global Production
• International Production is of increasing significance because of its
direct connection to trade.
• A recurring theme in Friedman’s work is the transformation of
production processes associated with globalization.
• In The Lexus and the Olive Tree, Friedman focuses on how people are
using sophisticated, multifunctional, postindustrial-age products and
services.

7. • Since the industrial revolution, innovation has changed radically,
occurring in quantum leaps and at an exponential rate.
• The production process has also shifted from one based largely on
assembly lines to the use of robots to make a wide variety of high-
valued merchandise.

8. • The typical technologies of globalization include “ computerization,
miniaturization, digitalization, satellite communications, fiber optics
and the internet.
• Help connect people everywhere in ways previously unthought-of (
both for good and for bad)

9. • Along with this, the production process has also become much more
fragmented due to vertical specialization and outsourcing.
• E.g: Boeing’s 787 Dreamliner commercial jet is assembled in Everett
Washington, but many of its components parts are manufactured in
other parts of the U.S and outside the U.S

10. • In his book, The World is Flat, Friedman shows how the rapid spread
of production processes throughput the world has empowered
individuals to collaborate and compete globally.
• As anyone who has waited on the phone while speaking to a
company “representative” in India can appreciate, new satellite
communication networks make it easier to outsource production and
services – although not seamlessly or satisfactorily

11. • According to Friedman, “every new product – from software to
widgets – goes through a cycle that begins with basic research, then
applied research, incubation, development, testing, manufacturing,
support, and finally continuation engineering in order to add
improvements.

12. • Friedman’s flat world is one giants video screens, call centers, and the
outsourcing of tax returns and flight reservations to places like India
where workers are eager to obtain good-paying jobs tied to
participation in the global economy.

13. • The transformation and globalization of production processes is
occurring not only in manufacturing but also in food, agriculture, and
sophisticated national security systems
• Changes in production are tied to changes in patterns of foreign
direct investment (FDI)

14. • FDI consists mostly of investments by foreign companies in factories,
mines, and land.
• Between 1980 and 2011, the value of global FDI inflows increased
from $54 billion to $1.5 trillion (table 6-1)
• In the past, most inward flows of FDI were concentrated among
developed nations
• As late as 2000, developed nations received 81% of FDI

15. • However, by 2011 they took in only 49%, as investment rapidly
spread out to every continent, especially Asia and south America,
causing these areas of the world to become much bigger producers of
manufactured goods and commodities.

16. • In the developed regions, most FDI has flowed to the U.S and the E.U,
but after the financial crisis of 2008 these regions lost a lot of
investment and some more of their manufacturing.
• In the beginning of the 90s, the share of total world FDI for
developing nations like China, Hong Kong, Singapore, Brazil, and Chile
jumped significantly.

17. • Until the mid-2000s, very little FDI flowed to India, the former Soviet
Union, the Middle East, and Sub-Saharan Africa
• But by 2008, investors began pouring money into India’s services
sector and Russia’s booming manufacturing and energy sectors
• Africa has seen a bigger inflow in recent years, due to Chinese
interest in commodities in the continent.

19. • Global foreign direct investment (FDI) totaled US$1.39 trillion in
2019, slightly less than a revised $1.41 trillion for 2018.
• The United States remained the largest recipient of FDI ($251 billion),
followed by China ($140 billion) and Singapore ($110 billion).

20. • Flows to developed economies as a group decreased by 6% to an
estimated $643 billion – just half of the peak amount recorded in
2007.
• The trend for developed economies was conditioned by FDI dynamics
in the European Union,
• where inflows declined by 15% to an estimated $305 billion.

21. • Developing economies remained unchanged in 2019 at an estimated
$695 billion, meaning that these countries continued to absorb more
than half of global FDI.
• Analysis of the different developing regions showed the highest
growth for Latin America and the Caribbean, at 16%.
• Africa continued to register a modest 3% rise while flows to
developing Asia fell by 6%.

22. FDI inflows: global and by group of economies, 2008–2019*
(Billions of US dollars)
Source: UNCTAD

23. • According to Eric Thun, these patterns of investment have contributed
to the mobility of capital and to the tendency of industries to leave
the industrialized nations in search of new markets, cheap labor, or
other production advantages in developing parts of the world.

24. • While private FDI to emerging countries has increased for the last two
decades, ODA has flat-lined.
• Developing countries between 2000 and 2007 reduced their reliance
on loans from foreign governments, the IMF, and the World Bank,
• but with the onset of the global financial crisis many of them borrowed more
from their sources to invest in new development projects

25. • Many mercantilists and structuralists note that these trends have
important consequences for the distribution of the world’s wealth
and power through international trade as well as for labor conditions,
the environment, and other issues.

26. • The change in global production can be seen in GDP trends.
• The World Bank reports that in 2011 the world’s GDP totaled $70
trillion:
• with the 70 high-income countries accounting for $46.6 trillion or 67% of the
total
• The 108 middle-income countries accounted for $23 trillion or 33% of the
total
• The 36 lowest-income countries accounted for only $474 billion or just 0.7%
of the world total output.

27. • Middle-income countries like China, Russia, Brazil, and India are
producing a rapidly growing share of the world’s goods and services,
while the U.S, the E.U and Japan (since the global financial crisis) are
producing a smaller proportion of the world’s output.
• Sadly, the world’s poorest countries (20% of all countries) simply do
not contribute any significant goods or services to the global
economy.

28. International Trade
• International has grown dramatically as a reflection of increased
global demand and the internationalization of production.
• During the period from 1983 to 2011, world exports of goods
increased from a total of $1.8 trillion to $17.8 trillion.
• Between 2000 and 2011, world exports of commercial services such
as travel, transportation, and insurance increased by more than 8% a
year to reach $4.2 trillion in 2011.

29. • National economies have become much more reliant on trade.
• According to the World Bank, international trade as a percentage of
GDP went up significantly between 1995 and 2009:
• 23-26% in the U.S., 58 to 71% in the E.U27 , and 17 to 25% in Japan.

30. • Trade ties countries together, generating significant economic,
political, and social interdependence.
• For most countries, trade is an easy way of generating income and
jobs.
• For many developing nations, it is often a critical component of
development plans.

31. • Thus, in a highly integrated international political economy, states are
compelled to regulate trade in order to maximize its benefits and
limit its costs to their economies.
• As a result, one state’s trade policies can easily impose costly socio-
economic adjustment problems on other states.

32. • Without a set of international rules and procedures, nationalistic
trade policies could easily undermine the entire production and trade
structure.
• The production and trade structure pulls national leaders, IO and
NGO officials, and the public in several directions at once.

33. • On the whole, economic liberals tend to emphasize that the rational
thing for states to do is to agree on a common set of international
rules that will maximize the gains from trade in a competitive global
economy.
• Without these rules, many states and domestic groups are likely to
incur substantial economic losses

34. • Mercantilists and structuralists agree that there are economic gains
to be made from trade, but they insist that trade is a much more
complex and controversial topic
• because of the way it contributes to national ower and how it benefits some
groups

35. The three perspectives on International
Trade
• Economic Liberals: many of their ideas are rooted in the late 18th
century and early 19th century views of Adam Smith and David
Ricardo’s reaction to mercantilist abuses at the time.
• Proposed a distinct liberal theory of trade that dominated British
policy for more than a century and is still influential today.

36. • Smith generally advocated laissez-faire policies
• Ricardo went one step further; his work on comparative advantage
showed that free trade increased efficiency and had the potential to
make everyone better off.
• It matters little who produced the goods, where, or under what
circumstances, as long as individuals were free to buy and sell them
on open markets.

37. • The law on comparative advantage suggests that when people and
nations produce goods,
• they give up other things they could have produced but that would have been
more expensive to make than the goods they actually created (opportunity
cost)

38. • This law invites us to compare the cost of producing an item
ourselves with the availability and cost of buying it from others, and
to make a logical and efficient choice between the two.
• In Ricardo’s day, the law of comparative advantage specified that GB
should import food grains rather than produce so much of them at
home,
• because the cost of imports was comparatively less than the cost of local
production

39. • In the late 1980s: for many economic liberals the world was
becoming a global workshop where everyone could benefit from free
trade, guided by the invisible hand of the market.
• Today, lightly regulated trade is also an integral part of other policies
linked with the Washington Consensus promoted by the U.S. and
other members of the WTO

40. • A large (but far from universal) consensus exists that the benefits of a
liberal, open international trade system far outweigh its negative
effects.

41. • Mercantilists : Alexander Hamilton and Friedrich List challenged the
economic liberal doctrine about trade.
• Free trade policies were merely a rationale for England to maintain its
dominant advantage over its partners.
• For Hamilton, supporting U.S. infant industries and achieving national
independence and security required the use of protectionist trade
measures.

42. • List argued that in a climate of rising economic nationalism,
protectionist trade policies such as import tariffs and export subsidies
were necessary if Europe’s infant industries were to compete on an
equal footing with England’s more efficient enterprises.
• List maintained in order for free trade to work for all, it must be
preceded by greater equality between states, or at least a willingness
on their part to share the benefits and costs associated with it.

43. • Neo-mercantilist challenge the assumption that comparative
advantage benefits both or all of the parties engaged in trade.
• People employed in different industries or sectors of any economy
can be expected to resist being laid off or moving into other
occupations as comparative advantages shift around to different
nations.

44. • States can intentionally create comparative advantages in the
production of new goods and services by adopting strategic trade
policies
• such as provision of cheap loans and export subsidies to domestic producers
• New technologies and other resources such as cheap labor can easily
help one state’s new industries gain a comparative (competitive)
advantage over another state
• E.g.: farming, auto, steel and textile manufacturing.

45. • It is a political reality in democratic nations with representative
legislatures that the state is expected to protect society and its
businesses from the negative effects of trade.
• When many domestic groups and industries appeal to the
government for protection, they are likely to receive help because
politicians fear the anger of constituents who face layoffs or
competition from cheaper imports.

46. • In many cases, protection is a built-in feature of many democratic
systems.
• Those who benefit from a small savings on the price of an imported
article of clothing or new care due to free trade, usually do not speak
as loudly as displaced workers who seek for protection from free
trade.

47. • Trade protectionism also stems from a fear of becoming too
dependent on other nations for certain goods, especially food items
related to national defense.
• E.g.: japan and china have worried too much dependency on other
states for energy imports can lead to economic or political
vulnerability.

48. • Some neo-mercantilists are concerned that the protectionist trade
policies of a regional trade alliance such as the NAFTA or the EU
might intentionally or unintentionally disrupt another country.
• Because they are designed to help local industries

49. • For many mercantilists, economic liberal theories about trade cannot
account adequately for the real political world in which states
constantly manipulate production and trade.

50. Structuralists
• Label the early mercantilist period as one of classical imperialism.
• Economic problems in the major European powers drove them to
colonize underdeveloped regions.
• Mercantilist policies emphasizing exports became necessary when
capitalist societies experienced depression.

51. • Manufacturers overproduced industrial products,and financiers had a
surplus of capital to invest abroad.
• Colonies served at least 2 purposes :
- places to dump goods
-places where investment could be made in industries that
profited from cheap labor and access to plentiful (and cheap) natural
resources and mineral deposits.

52. • Lenin and other Marxists theorists argued that national trade policies
mostly benefited the dominant class in society – the bourgeoisie.
• During the early colonial period, underdeveloped regions of the world
remained on the periphery of the international trade system,
providing European powers with primary goods and minerals.

53. • Towards the end of the 19th century, capitalists countries used trade
to spread capitalism into their colonies.
• The soft power of finance as much as the “hard” power of military
conquest helped to generate empires of dependency and exploitation

54. • Wallerstein stresses the linkages between core, peripheral, and semi-
peripheral regions of the world.
• Today’s patterns of international trade are determined largely by an
international division of labor between states in these 3 regions that
drives capitalism to expand globally.

55. • The integration of global markets and free-trade policies associated
with globalization are extensions of the same economic motives of
imperial powers of the nineteenth and twentieth centuries.

56. • Each of the three IPE perspectives on trade contains a different
ideological outlook.
• Today, a majority of academics and policy officials still favor an
international trade system that is supposed to be progressively
liberalizing and opening up.

57. • Yet, most nations tend to behave in a mercantilist fashion and adopt
protectionist measures when their national interests are threatened.
• Some developing and industrialized countries are concerned that
trade may be more exploitative than mutually advantageous.

58. GATT And The Liberal Postwar Trade
Structure
• Before WWII, trade rules reflected the interests of the dominant
states (Great Britain, France, and Germany).
• Despite a few decades in which economic liberal ideas prevailed,
protectionism was the order of the day

59. • Trade rules were enforced at the point of a gun,
• as when the U.S forced Japan to open its doors to U.S trade in the 1860s and
the European powers forced open China and the Ottoman empire in the 19th
century
• During the Great Depression, protectionism spiraled upward while
international trade decreased significantly (estimated 54% between
1929 and 1933.

60. • According to some historians, the trade situation and the depressed
international economy helped generate the bleak economic
conditions to which ultranationalist leaders such as Mussolini and
Hitler reacted.
• In contrast to common assumption that the U.S has always supported
free trade, it was not until 1934 that the U.S officially adopted a free
trade policy

61. • The post WWII structure of the capitalist world’s political economy
was establish in 1944 at the Bretton Woods conference.
• The Allied led by the U.S and GB created a new liberal economic
order that they hoped will prevent many of the interwar economic
conflicts and problems that had led to WWII.

62. • The U.S promoted the establishment of an International Trade
Organization (ITO)
• to oversee new trade rules that would gradually reduce tariffs, subsidies, and
other protectionist measures, offsetting mercantilist tendencies.
• The ITO never get off the ground because a coalition of protectionist
interests in the U.S Congress forced the United States to withdraw
from the agreement

63. • The GATT, a temporary alternative structure for trade negotiations
was established by President Truman
• In 1948, became the primary organization responsible for the
liberalization of international trade.
• Through a series of multilateral negotiations called rounds, the
world’s main trading nations agreed to reduce their own protectionist
barriers in return for freer access to the markets of others

64. • Basic principles of the GATT: reciprocity and nondiscrimination.
• Trade concessions were reciprocal – i.e. all member nations agreed to
lower their trade barriers together.
• The lost in protection for domestic industry was to be offset by freer
access to foreign markets

65. • To prevent bilateral trade wars, and support non-discrimination, the
principles of national treatment and most-favored nation treatment
• required that imported goods be treated the same as equivalent
domestically produced goods and that import from one nation could not be
given preference over those from another.
• Until the 1980s most communist countries refused to join the GATT,
viewing it as a tool of western imperialism

66. • Reciprocity and nondiscrimination proved to be potent during the
early rounds of GATT negotiations
• Many nations peeled away their protectionist barriers and
international trade expanded dramatically
• However, it was not possible to divorce politics from trade: some
nations were not always willing to grant reciprocity to their trading
partners automatically

67. • Reciprocity was granted selectively to those they favored politically
and withheld from other states.
• E.g.: the US advanced a variety of foreign policy objectives by
withholding or threatening to withhold MFN status from China.

68. Mercantilism on the Rebound
• During the 1960s and the early 1970s, international trade continued
to grow but not at the rate at which it had earlier.
• Under pressure to stimulate economic growth, many nations reduced
their tariff barriers.
• At the same time, they devised new and more sophisticated ways to
bolster their exports and limit imports.

69. • By the time, the Tokyo round of the GATT(1973-1979) go underway,
the level of tariffs on industrial products had decreased to an average
9%
• The Tokyo round tried to deal with a growing number of nontariff
barriers (NTBs) that many believed were stifling world trade

70. • Rules and codes were established to limit a range of discriminatory
trade practices including the use of export subsidies, countervailing
duties, dumping, government purchasing practices, government-
imposed product standards, and custom valuation and licensing
requirements on importers.

71. • Many liberals at the time argued that the Tokyo round did not go far
enough in dealing with NTBs or with enforcing GATT rules.
• In the 1970s and 1980s, the industrialized nations encountered a
number of old and new kinds of trade problems.
• Trade among the industrialized nations quadrupled from 1963 to
1973, but increased only two and one-half times in the next decade.

72. • Meanwhile, trade accounted for increasingly higher percentage of
GDP: around 20% for the U.S, 20% for Japan, and an average 50% for
members of the E.U
• Trade policy continued to be a serious source of tension and
disagreement among the industrialized nations, reflecting their
increasing dependence on trade to help generate economic growth

73. • Japan (a typical example of a mercantilist nation during this period)
benefitted from the liberal international trade system while erecting
domestic trade and other protectionist policies.
• By the 1970s, Japan’s export-led growth trade strategy began to bear
fruit.
• Its Ministry of International Trade and Industry (MITI) helped pick
corporate winners that it and other government officials felt would
prosper in the international economy from state assistance.

74. • These industries were high-employment, high-technology firms
whose future looked bright.
• Working closely with their national firms, the Japanese and the Newly
Industrializing Countries (NICs) began assisting their firms in ways
that would put them in a strong competitive position.

75. • The term “strategic trade policy” became synonymous state efforts to
stimulate exports or block foreign access to domestic markets.
• Aside from export subsidies and the use of a variety of import-
limiting measures, strategic trade policy measures often involved
support to “infant industries”

76. • Also included “the use of threats, promises, and other bargaining
techniques in order to alter the trading regimes in ways that improve
the market position and increase the profits of national corporations”
• In the U.S: the Omnibus Trade and Competitiveness Act of 1988
required the U.S trade representative to annually list “priority”
countries that unfairly threatened U.S exports.

77. • The legislation was designed to put unilateral pressure on countries
to negotiate with the U.S to change their offending trade policies.
• France, in 1982 sought to protect its VCR manufacturers from
Japanese competition by requiring all imported VCRs to go through a
tiny inland customs office in Poitiers where officials deliberately
stalled the clearing of imports.

78. • Also, Europe and the U.S in the 1980s negotiated voluntary export
restraints (VERs) with Japan in order to limit its exports of
automobiles to their markets.

79. • By accepting some amount of protectionism, free trade was slowly
replaced by “fair trade” or “ level playing field”, where states enacted
policies to counteract some policies of their trading partners.
• Trade policy moved from the multilateral arena of GATT to a series of
bilateral discussions such as those between the U.S and Japan, the
U.S and E.U.

80. The Uruguay Round
• Under increasing protectionism, the Reagan administration sought to
reassert the liberal vision of free trade
• Realist-mercantilists point out that the administration wanted to
spread economic liberal policies to counter the influence of the “evil
empire” (the soviet union) in developing countries.

81. • This led to the eight GATT round – the Uruguay round.
• Began in 1986 and ended in December 1993.
• Economic liberals tend to view this round as a success because it
spurred an increase in the volume and value of international trade.

82. • Many import quotas were eliminated and export subsidies were
brought under control.
• A surge of FDI and trade, embedding national economies in an
interdependent international trade network.
• The round established new rules and regulations to limit protectionist
measures such as “dumping” and the use of state subsidies

83. • It established 15 working groups that dealt with such items as market
access for textiles and agricultural goods; intellectual property rights;
restrictions on foreign investments; and trade in services.
• Reflected recognition that as production changed and spread to
different parts of the world, it affected both the amount and kind of
international trade.

84. • This time trade officials made the issue of agricultural assistance and
reform one of the main objectives of the Uruguay round.
• The U.S and the Cairns Group (Australia, and 17 other pro-free trade
countries) led a radical effort to phase out all agricultural subsidies.
• After resistance by some U.S farm groups and government officials,
the U.S agreed to gradually eliminate its domestic farm programs and
agricultural trade support measures.

85. • E.U efforts to reduce their agricultural subsidies were complicated by
the E.U Common Agricultural Policy ( a community wide farm
program reflecting the combined interest of the 15 member states,
with France more critical of efforts to decrease agricultural support)

86. • It took 5 year in a politically difficult and complicated process, to
bring EU’s farm program in line with GATT reform proposal
• U.S exporter expected a new multilateral agreement to produce
20,000 jobs for every $1 billion increase in exports and access to
overseas markets for U.S semi-conductors, computers, and
agricultural commodities.

87. • However, agricultural trade remained one of the major sticking points
of the negotiations, shutting them down on several occasions.
• Eventually in November 1993, a consensus on agriculture was
reached that reflected numerous “deals” and compromises between
nations.

88. • Under the new agreement, all countries were to reduce their use of
agricultural export subsidies and domestic assistance gradually over a
period of years.
• States were allowed to convert non-tariff import barriers to into tariff
equivalents, which were to be reduced in stages

89. • However, because of the strength of farm lobbies and the importance
of agricultural exports in many of these countries, the method for
calculating tariff equivalents in most cases actually set new tariff
levels higher than they had been,
• effectively nullifying efforts to reduce farm support.

90. • Trade officials claim that progress was made toward liberalizing
agricultural trade in Uruguay round, but in reality, protectionism
remained a key feature of agricultural.
• The Uruguay agreement produced some sixty or so agreements on a
host of other issues, including safeguards, rules of origin, technical
barriers to trade and textiles and clothing.

91. • A new General Agreement on Trade in Services (GATS) liberalized
trade in banking, insurance, transport, and telecommunications
services by applying the principle of national treatment and most-
favored nation.
• A new agreement on Trade-Related Aspects of Intellectual Property
Rights( TRIPS) required countries to maintain minimum standards for
protection of patents, copyrights, and trademarks – and to effectively
enforce those standards

92. The World Trade Organization
• The final agreement of the Uruguay round launched the new World
Trade Organization, which by 2012 had 157 members accounting for
97% of global trade.
• Its primary job is to implement the GATT, GATS and TRIPS
agreements.
• Also acts as a forum for negotiating new training programs to
developing countries.

93. • Its decisions are to be made by a consensus of the members and its
decision making structure includes:
• a secretariat, (administrative body),
• a ministerial conference, that meets at least once every two years
• a general council composed of ambassadors and delegation heads
that meets several times a year in Geneva.

94. • Uses Dispute Settlement Panels (DSP) that rule on trade disputes,
giving the WTO an enforcement mechanism that the GATT did not
have.
• Countries that refuse to enforce the ruling of DSP can be subject to
trade sanctions by member states.

95. Cases of DSP
• A judgment against the EU’s attempt to limit imports of hormone-fed
U.S beef into the EU.
• The transatlantic conflict over the production and use of genetically
modified foods and organisms(GMO)
• Dispute over subsidies to aircraft manufacturers arbitrated by panels
that found both Boeing and Airbus had improperly received massive
subsidies from the U.S and the E.U, respectively.

96. • Since the founding of the WTO, trade disputes have become more
complex and politicized.
• Some nations have even threatened to withdraw from the WTO
when DSP decisions go against them
• Most states have either accepted the findings of dispute resolution
panels or arrived at satisfactory resolution of trade spats through
negotiations

97. The Doha “Development Round”
• The next round of multilateral trade negotiations was to begin in
1999, but the talks in Seattle ended in deadlock, with riots in the
streets and antiglobalization protesters blocking delegates from
entering negotiations.

98. • The “Battle of Seattle”, became a rallying cry for many anti-
globalization activists concerned about:
- violations of human rights in sweatshops,
- agribusinesses in developing countries,
- Effects of large capitalist enterprises on the environment,
- Lack of transparency in WTO decision making
- Ethical issues

99. • Critics questioned the WTO’s ability to deal with these problems and
its effects on sovereignty and competition policy.
• After 9/11, trade officials pushed to restart multilateral trade talks.
• The next multilateral trade round began at the meeting in Doha,
Qatar,

100. • From the beginning many developing countries complained that
agreements reached in the Uruguay round had not resulted in
significant gains for them.
• Argued that before new trade agreements could be reached, the
developed nations would have to include developing nations in the
negotiation process.

101. • The Doha round was nicknamed the “development round” to reflect
the growing importance of developing nations in the international
trade system.
• At Cancun, Mexico (November 2003), ministerial talks broke down
once again.
• U.S special trade representative Robert Zoellick blamed developing
countries and NGOs(associated withanti-globalization campaign) for
resisting efforts to reach an agreement

102. • Some developing countries claimed to be suffering more poverty,
along with environmental, social, and economic damage, after
implementing WTO’s rules.
• Growing resistance to efforts by the U.S, the EU, and Japan to
implement the “Washington consensus”
• A one-size-fits-all strategy of economic development that included
trade liberalization.

103. • Headed by Brazil, India, South Africa and China, the group of 20 (G20,
not to be confused with the financial G20), focused on cutting farm
subsidies in rich countries.
• As a bloc, they dismissed 105 changes in WTO rules that would have
provided developed countries more access to their markets.

104. • To restart the talks the U.S. offered to cut subsidies if others did the
same.
• However, its commitment to trade seemed hollow, given that the
2002 farm bill passed by Congress had increased U.S. farm and
agribusiness support by $70 billion.

105. • Critics argued that these kinds of policies caused more
• - overproduction and the dumping of excess commodities onto world
markets,
• - Distortion to world commodities prices,
• - Displacement of production in developing countries, and depressing
prices local farmers received.

106. • Late in 2005, the Group of 20, pushed the U.S. and the EU to cut
domestic agricultural support and reduce agricultural export
subsidies.
• At the Group of 8 meeting, in 2006 the major powers made made
another failed attempt to come to an agreement that would
complete the Doha round.

107. • The Doha mostly came to a halt in 2008.
• Developed countries insisted on greater non-agricultural market
access (NAMA), meaning that developing countries would lower
tariffs on industrial imports dramatically.

108. Other issues on the Doha Agenda
• TRIPS : many developing countries argue, that TRIPS limit their access
to generic medicines by protecting patents held mainly by U.S
companies (Patent Rights vs Patient Rights)
• Allowing developing nations to produce cheaper generic drug would
hurt the profit of major drug manufacturers.

109. • The WTO failed to reach consensus on specific measures regarding:
-“cultural products” (such as movies),
- insurance companies,
- security firms,
- banking across national borders, and
- protectionist “local content” legislation.

110. • Fears that the Doha round will never be successfully concluded,
possibly leading to the demise of the WTO altogether
• Some believe the inclusion of developing nation in the WTO has
created such a large agenda it has become nearly impossible to find
consensual positions.

111. • Heterodox interventionist liberals (HILs) and mercantilists claim that
without an assertive hegemon,
• the globalization of trade has made it too difficult for states to reconcile trade
liberalization with domestic pressures for protection from trade’s dislocating
effects.